This module allows you to analyze existing cross correlation between Seoul Comp and Madrid Gnrl. You can compare the effects of market volatilities on Seoul Comp and Madrid Gnrl and check how they will diversify away market risk if combined in the same portfolio for a given time horizon. You can also utilize pair trading strategies of matching a long position in Seoul Comp with a short position of Madrid Gnrl. See also your portfolio center. Please also check ongoing floating volatility patterns of Seoul Comp and Madrid Gnrl.

Pair Volatility

Assuming 30 trading days horizon, Seoul Comp is expected to generate 1.16 times more return on investment than Madrid Gnrl. However, Seoul Comp is 1.16 times more volatile than Madrid Gnrl. It trades about 0.07 of its potential returns per unit of risk. Madrid Gnrl is currently generating about -0.03 per unit of risk. If you would invest 244,282 in Seoul Comp on February 17, 2018 and sell it today you would earn a total of 3,221 from holding Seoul Comp or generate 1.32% return on investment over 30 days.

Correlation Coefficient

Pair Corralation between Seoul Comp and Madrid Gnrl

0.21

Parameters

Diversification

Modest diversification

Overlapping area represents the amount of risk that can be diversified away by holding Seoul Comp and Madrid Gnrl in the same portfolio assuming nothing else is changed. The correlation between historical prices or returns on Madrid Gnrl and Seoul Comp is a relative statistical measure of the degree to which these equity instruments tend to move together. The correlation coefficient measures the extent to which returns on Seoul Comp are associated (or correlated) with Madrid Gnrl. Values of the correlation coefficient range from -1 to +1, where. The correlation of zero (0) is possible when the price movement of Madrid Gnrl has no effect on the direction of Seoul Comp i.e. Seoul Comp and Madrid Gnrl go up and down completely randomly.